Unemployment and Reduced Income
Losing your job can have a severe impact on your finances and your ability to pay the bills you incurred when you thought your job was secure. Loss of income coupled with large quantities of debt is one reason people wind up needing to file for bankruptcy. Your eligibility to file for a particular type of bankruptcy depends in part on your income, however. It is easier to pass the "means test" and file for Chapter 7 bankruptcy if you have lost your job. However, it is very difficult to file or proceed with Chapter 13 bankruptcy if you do not have a steady source of income. Whatever your situation, a knowledgeable Montgomery bankruptcy attorney can offer you sound advice on how to proceed.Filing for Chapter 7 Bankruptcy After Losing Your Job
If you have significant assets and property that is not protected by Alabama exemptions, you may have these liquidated and sold off to pay creditors. Most debtors who pass the "means test" are not in this situation. They usually have low-value or a small number of higher-value assets protected by exemptions so that when they file for Chapter 7, they can keep their property. Creditors will not be repaid in those types of bankruptcies. In Alabama, unemployment insurance, as well as other public benefits, is exempted. They cannot be liquidated in order to pay your creditors.
Bankruptcy courts are split on whether unemployment benefits count as income for purposes of the qualifying "means test" for Chapter 7 bankruptcy. The means test looks at your last six months worth of income to determine whether you qualify, but it excludes social security benefits. Some, but not, all bankruptcy courts perceive unemployment insurance as a social security benefit. Your bankruptcy attorney can tell you whether you must construe your unemployment benefits as income when applying the means test.
Under Chapter 13, you must pay back some or all of your debts through a debt repayment plan and in exchange you can use a variety of tools to avoid losing assets and property. Because you need to be able to make a payment every month, it is critical to have income. Unemployment can throw a wrench into that. When you file your Chapter 13 paperwork, you must show the court you can make the monthly payment you have proposed. If you can't make that showing, your case will be dismissed.Talk to an Alabama Bankruptcy Lawyer About Your Loss of Income
The loss of a job can be painful. When you've been accumulating debt with the assumption that you'll be able to pay it back, job loss can feel like a rug has been pulled out from beneath you. However, Alabama bankruptcy lawyer Charles Grainger can evaluate whether your financial situation warrants filing bankruptcy. Your loss of income may make you eligible for Chapter 7 bankruptcy, which gives you a clean slate. There are also some instances in which you may still be able to file for Chapter 13 bankruptcy or continue to make your Chapter 13 monthly payments, even after you've lost your job. We serve clients in the areas surrounding our offices located in Montgomery, Prattville, and Troy, Alabama. Call us at (334) 260-0500 or contact us online to schedule a consultation.